A positive impact
Alan Swaby talks to a South African metal recycler and learns about some of the issues facing the industry as a whole.
As well as being managing director of one of JohannesburgÔÇÖs top five waste metal recyclers, Juan Patuel is also chairman of the Metal Recycling Association of South Africa (MRASA). As such, he comes into contact with all the issues affecting the collection and disposal of scrap metals in the country today.
Although not directly involved with the public at largeÔÇöAlex Trading only deals with scrap generators or licensed dealersÔÇöMRASA is only too aware of the scrap industry often being a conduit for stolen property.
ÔÇ£We work in an industry that has its shady characters,ÔÇØ admits Patuel. ÔÇ£But unlike many countries, ours isnÔÇÖt blighted by well-organised, criminal gangs, stealing scrap to order. Rather we have hundreds or thousands of poor people who are willing to steal opportunistically, in order to stay alive. Some of those goods find their way into the supply chain.ÔÇØ
So together with other organisations, MRASA has helped the government draft the Second Hand Goods Act, already signed by the president but not yet promulgated, which should make it more difficult to sell stolen property, or at least make it easier for the police to trace the guilty parties if itÔÇÖs after the event. Under the Act, nothing should be sold through dealers without the production of identification and goods will be photographed and held for seven days before being re-sold. The breathing space may enable stolen goods to be identified or the photos could be used for verification afterwards. Either way, the goods will be traced back to the individual bringing them in.
At the other end of the spectrum, Patuel is kept busy fending off challenges from South African aluminium producers who are trying to convince the government to impose export duties on scrap. ÔÇ£ItÔÇÖs a constant guerrilla war,ÔÇØ he says, ÔÇ£with the association taking the opposite point of view and trying to maintain a free market so we can export if we need to at competitive prices.ÔÇØ
In the meantime, with his managerÔÇÖs hat on, Patuel runs the trading side of the family business alongside his sister, who takes care of finances. As middleman, Alex Trading has two sets of customers to keep happy. About 60 per cent of raw material comes from end-of-life disposals, through a network of small dealers, while the other 40 per cent comes directly from manufacturers who are generating waste material on a daily basis.┬á
Alex TradingÔÇÖs role is to process the scrap into some usable form that is then either sold to local metal smelters and refiners or on the export market. As such, the metal might be chopped and packed in drums or baled in sizes to suit the individual customerÔÇÖs requirements. With no contracts to provide long-term security, all players in that market are kept on their toes by customers who may well switch allegiance for a few cents a kilo.
ÔÇ£As well as being competitive on pricing,ÔÇØ says Patuel, ÔÇ£we need to provide customers with the best service possible. Quick response times, efficient collections and prompt payment all keep customers happy.ÔÇØ
Established twenty years ago, Alex Trading dealt exclusively with non-ferrous metals for many years. A series of acquisitions, however, added ferrous and more recently, paper and plastic to the portfolio. ÔÇ£The two metal businesses are chalk and cheese,ÔÇØ says Patuel, ÔÇ£and we keep them completely separate. Non-ferrous is a boutique-style operation. Not much space is needed and the processing equipment is generally lightweight. WhatÔÇÖs more important is correct grading. Ferrous, on the other hand, is a much more robust business, more demanding of space, power and heavy duty machinery.ÔÇØ
Growth over the past five years has been healthy, with the whole of the economy benefiting from the vast amounts of money the government has been putting into infrastructure in readiness for next yearÔÇÖs soccer world cup tournament. As such, at its peak, Alex Trading has been processing around 10,000 tons of non-ferrous and 60,000 tons of ferrous metals, with a turnover of around ┬ú45 million. But it may not stay at those levels now that the governmentÔÇÖs splurge is slowing down and the global economic crunch has negatively affected the manufacturing sector.
Already, Alex Trading has trimmed whatever fat there was in the organisation. ÔÇ£We hope it doesnÔÇÖt come to this,ÔÇØ says Patuel, ÔÇ£but weÔÇÖre lean enough to operate successfully at lower volumes indefinitely. ItÔÇÖs probable that the majority of South African companies have yet to feel the worst of the economic downturn that the rest of the world has been living with.ÔÇØ
Behind the scenes there is a lot of structural re-adjustment needed in South Africa. Prior to the ANC government taking over fifteen years ago, the manufacturing sector flourished with the aid of government protection. Some companies did the sensible thing and invested the profits they made in keeping up-to-date, but many didnÔÇÖt. Since the move to a free market, complacent businesses such as those have failed. Without the contribution of modern productive machinery, the low labour cost of South Africa is wasted and Patuel believes the country is having difficulty in finding the right niche.
At the same time, there is also a high level of unrest within the labour market. Unions have a position of power within the ANC and are not shy about using it. Although Patuel has some sympathy regarding the often woeful conditions under which the majority of the population still live, calling strikes on a regular basis does nothing for the private sectorÔÇÖs confidence. Consequently, unemployment is high and skills are low, while private businesses are reluctant to take on labour.
But Alex Trading is making its own contribution by sponsoring a student bursary at a local private school. ÔÇ£The school identified a previously disadvantaged child from a low-income, single parent family who it felt had good potential. We pay the school fees and all related costs. ItÔÇÖs relatively modest but if all businesses did something similar, that would have a considerable impact.ÔÇØ
